<PAGE>
[LOGO OF EATON VANCE Mutual Funds
MUTUAL FUNDS APPEARS HERE]
for People
Who Pay
Taxes
[PICTURE OF EIFFEL TOWER APPEARS HERE]
Annual Report October 31, 1998
[PICTURE OF OSAKA CASTLE EATON VANCE
APPEARS HERE]
TAX-MANAGED
INTERNATIONAL
GROWTH FUND
[PICTURE OF SIDNEY OPERA HOUSE APPEARS HERE]
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
LETTER TO SHAREHOLDERS
[PHOTO OF JAMES B. HAWKES APPEARS HERE]
James B. Hawkes
President
Eaton Vance Tax-Managed International Growth Fund, Class A shares, had a total
return of -11.6% for the period from inception on April 22, 1998 through October
31, 1998. That return was the result of a decline in net asset value per share
(NAV) from $10.00 on April 22, 1998 to $8.84 on October 31, 1998./1/
Class B shares had a total return of -11.9% for the same period, the result of a
decline in NAV from $10.00 to $8.81./1/
Class C shares had a total return of -12.0% for the same period, the result of a
decline in NAV from $10.00 to $8.80.1
Amid evidence of a slowing global economy, equity markets were increasingly
volatile...
The world's markets were characterized by significant volatility in 1998, as the
weakness of the Asian economies was felt increasingly in Europe and in the U.S.
Market sentiment was dealt a further blow by the collapse of the Russian economy
and the lingering difficulties in Brazil and other emerging markets.
In Asia, the Japanese government tried in vain to stimulate consumer demand,
while making slow progress toward vitally important banking reforms. Meanwhile,
continental Europe and the U.K. experienced disappointing third-quarter growth.
Finally, while U.S. consumers remained active and confident, the manufacturing
sector continued to suffer from weak Asian demand. The Federal Reserve has
responded with three interest rate cuts, easing investors' concerns.
Nonetheless, the near-term outlook for U.S. economic growth is less robust than
in recent years.
The Fund continues to seek global growth opportunities for the tax-conscious
investor...
Investors should remember that, even in these uncertain economic times, many
global companies continue to generate strong earnings growth. Tax-Managed
International Growth Fund focuses on those opportunities, while pursuing a
tax-efficient strategy aimed at limiting taxable distributions to shareholders.
A tax-managed approach remains an important consideration for many investors,
especially following the failure to lower taxes in the last session of Congress.
Volatility in the stock market can be troubling, but Eaton Vance believes that,
as a normal and even healthy part of the investment process, it can also present
good opportunities for long-term investors. In the pages that follow, Portfolio
Manager Armin J. Lang discusses the recent period and offers his outlook for the
year ahead.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
December 9, 1998
- --------------------------------------------------------------------------------
Fund Information
as of October 31, 1998
Performance/2/ Class A Class B Class C
- --------------------------------------------------------------------------------
Cumulative Total Returns (at net asset value)
- --------------------------------------------------------------------------------
Life of Fund+ -11.6% -11.9% -12.0%
SEC Cumulative Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
Life of Fund+ -16.7% -16.3% -12.9%
+Inception Date - Classes A, B and C: 4/22/98
Ten Largest Holdings/3/
- --------------------------------------------------------------------------------
Siebe PLC 2.4%
Abbey National 2.2
VTECH Holdings Ltd. 2.1
Mayr-Melnhof 2.1
Volkswagen AG 2.0
Portugal Telecom 2.0
Scor SA 1.9
Schweizer Rueckversicherung 1.8
Orkla As A-Aksjer 1.7
Vontobel Holdings AG 1.5
/1/ These returns do not include the 5.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC)
for Class B and Class C shares./2/ Returns are historical and are calculated
by determining the percentage change in net asset value with all
distributions reinvested. SEC returns for Class A reflect the maximum 5.75%
sales charge. SEC returns for Class B reflect applicable CDSC based on the
following schedule: 5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th year;2%-
5th year; 1% - 6th year. SEC 1-Year return for Class C reflects 1% CDSC. /3/
Ten largest holdings accounted for 19.7% of the Fund's total net assets.
Holdings are subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
2
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
MANAGEMENT DISCUSSION
[PHOTO OF ARMIN J. LANG APPEARS HERE]
Armin J. Lang
Portfolio Manager
An interview with Armin J. Lang, portfolio manager of Tax-Managed International
Growth Fund.
Q: Armin, the U.S. market has been extraordinarily volatile in the past year.
We've seen it in foreign markets, as well. What are the reasons for the
global volatility?
A: Market volatility has been contagious in the past year, spreading from Asia
to the U.S. and elsewhere, primarily because global economies are so
interrelated. Companies today tend to market their products to a global
audience and are increasingly likely to have manufacturing or production
facilities outside their national borders. Therefore, when companies
encounter a slowdown in demand on one front, it tends to reverberate
elsewhere.
Interestingly, the close interactions of the global markets is making
investors -- especially in the U.S. -- more aware of foreign companies. There
is a growing realization among U.S. investors that foreign companies are
gaining market share at the expense of some leading U.S. companies. It's no
longer reasonable, for example, for investors in the auto sector to focus
solely on Detroit's Big Three, when companies such as Honda Motor Co., Toyota
Motor Co., and Volkswagen AG command equal respect in the global marketplace.
That is true in many other industries, as well, as investors are learning to
consider a wider, global menu of equities.
Q: How have you positioned the Fund in recent months?
A: We haven't made any significant shifts in regional allocations. At October
31, the Fund was 55.2% invested in continental Europe, 20.3% in the U.K.,
17.5% in Japan, and 7.0% elsewhere. Those figures are roughly in line with
the Fund's benchmark. Because our strategy is focused on long-term growth, I
prefer not to overcommit to any single region or country. In my view, those
"big bets" are rarely successful over the long-term.
From an industry perspective, the Fund's largest weightings were in banking,
health care, telecommunications, insurance and financial services. These are
areas of rapid growth as countries reform their financial systems, upgrade
their telecommunication infrastructures, and become more innovative in health
care in preparation for the next century.
- --------------------------------------------------------------------------------
Portfolio Global Weightings/1/
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Other 7.0%
Europe 55.2%
U.K. 20.3%
Japan 17.5%
Five Largest Industry Weightings/1/
- --------------------------------------------------------------------------------
Banking 10.3%
Health Care 9.0%
Telecommunications 7.8%
Insurance 7.7%
Financial 7.5%
- --------------------------------------------------------------------------------
/1/ Because the Fund is actively managed, Global Weightings and Industry
Weightings are subject to change. Five largest sector holdings account for
42.3% of the Portfolio.
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
3
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
MANAGEMENT DISCUSSION CONT'D
Q: In our last report, you stated a preference for consumer brand names. Is that
still a theme of the Fund?
A: Yes. Consumers identify closely with well-known brand names. The power of
brand names gives companies a significant edge, especially when companies are
trying to expand their reach into foreign markets. That is true across a
broad range of products.
The Fund has favored well-known brands in many industries, including Sony
Corp. in consumer electronics; Ericsson AB in cellular phones; Nestle in
foods; Christian Dior SA and Hugo Boss in clothes and fashion accessories;
Konica Corp. and Fuji Photo Film in photographic equipment; and Bridgestone
Corp. in tires. Excellent marketing and a reputation for good products have
enabled these companies to compete successfully with local companies on their
own turf and improved their prospects for global expansion.
Q: Let's look at the financial sectors. How did the companies emerge from the
recent upheaval in the markets?
A: Finance-related industries have undergone many changes in the face of
deregulation and increasing competition. The recent volatility in the world's
financial systems have made investors increasingly quality-conscious. In
Asia, that will likely mean a continuing shakeout between the stronger
companies and the weaker institutions. Meanwhile, in Europe, some companies
suffered from their exposure to Russia, but the damage was fairly contained.
There are many opportunities emerging for banks and finance companies with
the European economic union and the imminent introduction of the continent's
new currency, the Euro.
We have found many banks that are well-positioned to benefit from these
changes. For example, Hong Kong-based HSBC Holdings PLC is Hong Kong's
leading financial institution. While HSBC has played a major role in
financing the growing economic ties between China and the developed nations,
it also boasts large assets outside of Asia. In Europe, we've avoided
institutions with exposure to global trouble spots or those that have
ventured into volatile areas like the hedge fund business. We've balanced
large companies like the insurance giant Allianz AG Holding and AXA Company
with smaller institutions like the Bank of Scotland, Allied Irish Banks, and
the French reinsurer Scor SA. This diversification allows the Fund to
participate in both the major financial trends within the newly united
Europe, as well as domestic growth opportunities within individual countries.
Q: Telecommunications-related companies represented another major focus of the
Fund. What did you find attractive about those companies?
A: The telecommunications service companies have historically experienced stable
underlying growth rates. However, with the increasing variety of phone-based
services in recent years, the companies have witnessed faster incremental
growth. Telecom Italia Mobile has enjoyed cellular subscriber growth above
50% in recent years, while Portugal Telecom has established a new venture in
Brazil. Moreover, we find these companies far more attractive than Europe's
larger, state-owned, bureaucratic telecoms.
In the emerging markets, which typically have relatively low phone
penetration rates, telecom growth rates have been even more impressive. Hong
Kong Telecom, for example, is involved in several joint ventures aimed at
increasing phone service in mainland China, where the penetration rate is a
mere 7%.
Meanwhile, telecom equipment manufacturers continue to experience rapid
expansion. Nokia of Finland and Ericsson AB of Sweden are the world's largest
producers of cellular phones. Supplementing their rapid growth in developed
markets, the companies are producing enhanced models that offer fax
capabilities and Internet access. Finally, Nokia and Ericsson see potentially
explosive demand in the emerging markets in coming years.
4
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
MANAGEMENT DISCUSSION CONT'D
Q: Armin, what is your outlook for the global markets in the next year?
A: I'm very enthusiastic about the future of the global markets. While 1998
brought its share of difficulties, many of the market's concerns are being
addressed. Japan has finally proposed some credible first steps to address
its banking problems while also introducing measures to stimulate consumer
demand. A stronger Japanese economy would certainly benefit other Asian
economies.
Meanwhile, Europe is nearing monetary union, a single currency, and a more
level playing field. Not surprisingly, we are seeing the same consolidations,
mergers, and cost-cutting in Europe that characterized the U.S. a decade ago.
Those measures are beginning to make European companies more competitive
while adding significantly to shareholder value.
While this year's volatility has been unnerving at times, it has also created
some unusually good opportunities in the foreign markets. Those values are
likely to attract investors - especially in light of the vast outperformance
by the U.S. market. I believe that the Fund is well positioned to participate
in those opportunities in the year ahead.
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
4/22/98. Index information is available only at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations. Past performance is no guarantee of future
results. Investment return and principal fluctuate so that shares, when
redeemed, may be worth more or less their original cost.
The chart compares the Fund's total return with that of the Morgan Stanley
Capital International Europe, Australasia and Far East Index, a broad-based,
unmanaged market index of international stocks. Returns are calculated by
determining the percentage change in net asset value (NAV) with all
distributions reinvested. The lines on the chart represent the total returns
of $10,000 hypothetical investments in the Fund and the Index. The Index's
total returns do not reflect commissions or expenses that would have been
incurred if an investor individually purchased or sold the securities
represented in the Index. It is not possible to invest directly in an Index.
** Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. SEC returns for
Class A reflect the maximum 5.75% sales charge. SEC returns for Class B
reflect applicable CDSC based on the following schedule: 5% - 1st and 2nd
years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. SEC return
for Class C reflects 1% CDSC.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less their original cost.
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Tax-
Managed International Growth Fund, Class A vs. the Morgan Stanley Capital
International Europe, Far East, Australasia Index* April 30, 1998-October 31,
1998
Date Fund/NAV Fund/OP EAFE
- -------- -------- ------- -------
4/30/98 $10,000 $9,425 $10,000
5/31/98 $9,990 $9,415 $9,954
6/30/98 $9,949 $9,377 $10,031
7/31/98 $10,102 $9,521 $10,135
8/31/98 $8,861 $8,351 $8,882
9/30/98 $8,433 $7,948 $8,612
10/31/98 $8,993 $8,476 $9,512
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Tax-
Managed International Growth Fund, Class B vs. the Morgan Stanley Capital
International Europe, Far East, Australasia Index* April 30, 1998-October 31,
1998
Date Fund/NAV Fund/CDSC EAFE
------- -------- --------- -------
4/30/98 $10,000 $10,000
5/31/98 $9,980 $9,954
6/30/98 $9,929 $10,031
7/31/98 $10,081 $10,135
8/31/98 $8,840 $8,882
9/30/98 $8,403 $8,612
10/31/98 $8,962 $8,514*** $9,512
Comparison of Change in Value of a $10,000 Investment in Eaton Vance Tax-
Managed International Growth Fund, Class C vs. the Morgan Stanley Capital
International Europe, Far East, Australasia Index* April 30, 1998-October 31,
1998
Date Fund/NAV Fund/CDSC EAFE
------- -------- --------- -------
4/30/98 $10,000 $10,000
5/31/98 $9,969 $9,954
6/30/98 $9,929 $10,031
7/31/98 $10,071 $10,135
8/31/98 $8,830 $8,882
9/30/98 $8,393 $8,612
10/31/98 $8,952 $8,862*** $9,512
Performance** Class A Class B Class C
- --------------------------------------------------------------------------------
Cumulative Total Returns (at net asset value)
- --------------------------------------------------------------------------------
Life of Fund+ -11.6% -11.9% -12.0%
SEC Cumulative Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
Life of Fund+ -16.7% -16.3% -12.9%
+Inception Date - Classes A, B and C: 4/22/98
***Fund, assuming entire investment was redeemed at 10/31/98 and applicable
CDSC was applied.
5
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
PORTFOLIO OF INVESTMENTS
Common Stocks -- 95.6%
Security Shares Value
- --------------------------------------------------------------------------------
Appliances and Household Durables -- 3.5%
- --------------------------------------------------------------------------------
Aiwa Co. Ltd. 7,400 $ 182,889
Philips Electronics NV 5,000 266,103
Sony Corp. 4,300 273,063
- --------------------------------------------------------------------------------
$ 722,055
- --------------------------------------------------------------------------------
Automobiles -- 4.1%
- --------------------------------------------------------------------------------
Honda Motor Co. Ltd. 10,000 $ 300,352
Toyota Motor Co. 5,000 120,141
Volkswagen AG 5,700 428,480
- --------------------------------------------------------------------------------
$ 848,973
- --------------------------------------------------------------------------------
Banking -- 10.3%
- --------------------------------------------------------------------------------
ABN Amro Holdings 9,880 $ 185,148
Allied Irish Banks PLC 8,000 114,549
Allied Irish Banks PLC 4,100 58,676
Banco Popular Espanola 3,000 184,949
Bank of Scotland 18,053 195,761
Commerzbank AG 9,000 270,620
Dexia 1,100 162,120
HSBC Holdings PLC 7,277 165,131
Lloyds TSB Group PLC 12,117 149,859
National Australia Bank Ltd. 6,137 80,964
Svenska Handelsbanken "A" 2,400 100,856
UBS (Schw. Bank Gesellschaft) 600 164,599
Vontobel Holding AG 210 316,349
- --------------------------------------------------------------------------------
$ 2,149,581
- --------------------------------------------------------------------------------
Broadcasting and Publishing -- 1.0%
- --------------------------------------------------------------------------------
Nippon Television Network 700 $ 218,356
- --------------------------------------------------------------------------------
$ 218,356
- --------------------------------------------------------------------------------
Business and Public Services -- 3.1%
- --------------------------------------------------------------------------------
Dai Nippon Printing Co. Ltd. 10,000 $ 154,038
Rentokil Initial 36,000 224,125
Sap AG 310 130,087
Tas Groep NV(1) 30,000 136,532
- --------------------------------------------------------------------------------
$ 644,782
- --------------------------------------------------------------------------------
Chemicals -- 1.1%
- --------------------------------------------------------------------------------
Air Liquide 425 $ 71,127
Sumitomo Bakelite Co. Ltd. 23,000 153,952
- --------------------------------------------------------------------------------
$ 225,079
- --------------------------------------------------------------------------------
Construction and Housing -- 1.6%
- --------------------------------------------------------------------------------
Leighton Holdings Ltd. 20,000 $ 73,929
Volker Wessels Stevin 13,086 259,240
- --------------------------------------------------------------------------------
$ 333,169
- --------------------------------------------------------------------------------
Data Processing and Reproduction -- 1.5%
- --------------------------------------------------------------------------------
Canon, Inc. 16,000 $ 302,755
- --------------------------------------------------------------------------------
$ 302,755
- --------------------------------------------------------------------------------
Electrical and Electronics -- 6.2%
- --------------------------------------------------------------------------------
Ericsson AB 12,200 $ 274,680
Nokia Oyj-A 2,600 236,856
Sagem SA 250 159,484
Siemens AG 3,000 180,413
VTECH Holdings Ltd. 116,000 435,036
- --------------------------------------------------------------------------------
$ 1,286,469
- --------------------------------------------------------------------------------
Electronic Components - Instruments -- 3.2%
- --------------------------------------------------------------------------------
Rohm Co. 2,000 $ 177,808
Siebe PLC 121,000 496,970
- --------------------------------------------------------------------------------
$ 674,778
- --------------------------------------------------------------------------------
Energy Sources -- 3.6%
- --------------------------------------------------------------------------------
British Petroleum Co. PLC 15,540 $ 228,628
Eni SPA 37,000 220,634
Repsol SA 4,200 210,417
Royal Dutch Petroleum Co. 2,000 96,589
- --------------------------------------------------------------------------------
$ 756,268
- --------------------------------------------------------------------------------
Financial Services -- 7.5%
- --------------------------------------------------------------------------------
Abbey National 24,000 $ 466,235
Acom Co. Ltd. 3,500 195,529
ING Groep NV 3,036 146,948
Julius Baer Holdings 100 306,454
Nomura Securities Co. Ltd. 20,000 151,034
Promise Co. Ltd. 5,900 266,824
Spuetz GR(1) 1,000 41,964
- --------------------------------------------------------------------------------
$ 1,574,988
- --------------------------------------------------------------------------------
Food and Household Products -- 2.1%
- --------------------------------------------------------------------------------
Nestle 130 $ 276,473
Unilever PLC 17,000 170,108
- --------------------------------------------------------------------------------
$ 446,581
- --------------------------------------------------------------------------------
See notes to financial statements
6
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Health and Personal Care -- 9.0%
- --------------------------------------------------------------------------------
Astra AB, Class B 9,000 $ 141,037
Glaxo Wellcome PLC 6,000 186,595
Novartis AG 150 270,270
Novartis AG (Bearer Shares) 30 54,010
Novo Nordisk A/S-B 1,100 128,413
Roche Holding AG 25 291,685
Sankyo Co. Ltd. 13,000 293,401
Smithkline Beecham PLC 20,055 249,881
Takeda Chemical Industries Ltd. 2,000 65,048
Zeneca Group PLC 5,000 191,418
- --------------------------------------------------------------------------------
$ 1,871,758
- --------------------------------------------------------------------------------
Industrial Components -- 2.4%
- --------------------------------------------------------------------------------
Bridgestone Corp. 13,000 $ 286,150
Morgan Crucible Co. PLC 42,000 221,563
- --------------------------------------------------------------------------------
$ 507,713
- --------------------------------------------------------------------------------
Insurance -- 7.7%
- --------------------------------------------------------------------------------
Allianz AG Holding 800 $ 274,363
ASR Verzekeringsgroep 1,204 105,077
AXA Colonia Konzern AG 1,600 184,519
AXA Company 1,600 180,817
Prudential Corp. 7,000 91,497
Schweizer Rueckversicherung 170 378,614
Scor SA 7,000 401,331
- --------------------------------------------------------------------------------
$ 1,616,218
- --------------------------------------------------------------------------------
Leisure and Tourism -- 1.3%
- --------------------------------------------------------------------------------
Northern Leisure PLC 150,000 $ 263,765
- --------------------------------------------------------------------------------
$ 263,765
- --------------------------------------------------------------------------------
Machinery and Engineering -- 3.4%
- --------------------------------------------------------------------------------
Feintool International 1,500 $ 312,362
Holding(1)(2)
Smiths Industries 10,000 135,148
Technip SA 2,650 269,435
- --------------------------------------------------------------------------------
$ 716,945
- --------------------------------------------------------------------------------
Merchandising -- 1.4%
- --------------------------------------------------------------------------------
Autobacs Seven Co. Ltd. 3,000 $ 91,650
Promodes 200 125,931
Woolworths Ltd. 20,347 71,287
- --------------------------------------------------------------------------------
$ 288,868
- --------------------------------------------------------------------------------
Miscellaneous Materials and Commodities -- 2.9%
- --------------------------------------------------------------------------------
Mayr-Melnhof 9,306 $ 431,657
Nitto Denko Corp. 14,000 169,398
- --------------------------------------------------------------------------------
$ 601,055
- --------------------------------------------------------------------------------
Multi-Industry -- 4.5%
- --------------------------------------------------------------------------------
Hutchison Whampoa 13,000 $ 93,145
IFIL Finanz Di Partecipazoni 72,400 244,965
Orkla As A-Aksjer 21,400 361,398
Tomkins PLC 52,159 241,088
- --------------------------------------------------------------------------------
$ 940,596
- --------------------------------------------------------------------------------
Real Estate -- 0.1%
- --------------------------------------------------------------------------------
Fastighets AB Balder(1) 150 $ 1,401
Metroplex Berhad 225,000 20,097
- --------------------------------------------------------------------------------
$ 21,498
- --------------------------------------------------------------------------------
Recreation, Other Consumer Goods -- 3.5%
- --------------------------------------------------------------------------------
Christian Dior SA 2,800 $ 295,771
Fuji Photo Film 3,000 109,929
JJB Sports PLC 50,000 182,124
Konica Corp. 32,000 137,853
- --------------------------------------------------------------------------------
$ 725,677
- --------------------------------------------------------------------------------
Telecommunications -- 7.8%
- --------------------------------------------------------------------------------
Hong Kong Telecom 60,650 $ 121,363
Mannesmann AG 900 88,576
Portugal Telecom 9,000 426,765
Swisscom AG ADR(1) 6,500 218,563
Telecom Italia Mobile 23,000 133,641
Telecom Italia SPA 33,500 242,235
Telefonica 6,000 270,408
Vodafone Group PLC 9,034 120,883
- --------------------------------------------------------------------------------
$ 1,622,434
- --------------------------------------------------------------------------------
Utilities - Electrical and Gas -- 1.5%
- --------------------------------------------------------------------------------
Scottish Power PLC 15,000 $ 147,332
Veba AG 3,000 167,552
- --------------------------------------------------------------------------------
$ 314,884
- --------------------------------------------------------------------------------
See notes to financial statements
7
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Security Shares Value
- --------------------------------------------------------------------------------
Wholesale and International Trade -- 1.3%
- --------------------------------------------------------------------------------
International Muller NV 11,662 $ 280,982
- --------------------------------------------------------------------------------
$ 280,982
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $21,679,382) $19,956,227
- --------------------------------------------------------------------------------
Preferred Stocks -- 1.7%
Security Shares Value
- --------------------------------------------------------------------------------
Health and Personal Care -- 1.4%
- --------------------------------------------------------------------------------
Fresenius 1,700 $ 291,511
- --------------------------------------------------------------------------------
$ 291,511
- --------------------------------------------------------------------------------
Textiles and Apparel -- 0.3%
- --------------------------------------------------------------------------------
Hugo Boss 40 $ 62,311
- --------------------------------------------------------------------------------
$ 62,311
- --------------------------------------------------------------------------------
Total Preferred Stocks
(identified cost $400,214) $ 353,822
- --------------------------------------------------------------------------------
Warrants -- 0.0%
Security Shares Value
- --------------------------------------------------------------------------------
Multi-Industry -- 0.0%
- --------------------------------------------------------------------------------
IFIL Finanz Di Partecipazoni/(1)/ 350 $ 385
- --------------------------------------------------------------------------------
$ 385
- --------------------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 385
- --------------------------------------------------------------------------------
Commercial Paper -- 3.3%
Face Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
General Electric Capital Co., 5.69%,
11/2/98 $699 $ 698,890
- --------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $698,890) $ 698,890
- --------------------------------------------------------------------------------
Total Investments -- 100.6%
(identified cost $22,778,486) $21,009,324
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (0.6)% (125,930)
- --------------------------------------------------------------------------------
Net Assets -- 100.0% $20,883,394
- --------------------------------------------------------------------------------
/(1)/ Non-income producing security.
/(2)/ Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
See notes to financial statements
8
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Country Concentration of Portfolio
Percentage
Country of Net Assets Value
- --------------------------------------------------------------------------------
Australia 1.1% $ 226,180
Austria 2.1% 431,657
Denmark 0.6% 128,413
Finland 1.1% 236,856
France 8.0% 1,666,016
Germany 10.2% 2,120,396
Hong Kong 3.1% 649,544
Ireland 0.3% 58,676
Italy 4.0% 841,860
Japan 17.5% 3,650,170
Malaysia 0.1% 20,097
Netherlands 7.1% 1,476,619
Norway 1.7% 361,398
Portugal 2.0% 426,765
Spain 3.2% 665,774
Sweden 2.5% 517,974
Switzerland 12.4% 2,589,379
United Kingdom 20.3% 4,242,660
United States 3.3% 698,890
See notes to financial statements
9
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of October 31, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost, $22,778,486) $21,009,324
Cash 565
Receivable for investments sold 200,562
Receivable for Fund shares sold 179,630
Dividends receivable 24,075
Receivable from the Investment Adviser 18,112
Tax reclaim receivable 8,252
Deferred organization expenses 52,239
- --------------------------------------------------------------------------------
Total assets $21,492,759
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 514,623
Accrued organization expense 51,630
Payable for Fund shares redeemed 17,361
Other accrued expenses 25,751
- --------------------------------------------------------------------------------
Total liabilities $ 609,365
- --------------------------------------------------------------------------------
Net Assets for 2,367,999 shares of beneficial
interest outstanding $20,883,394
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid in capital $22,831,401
Accumulated net realized loss (computed on the basis
of identified cost) (147,240)
Accumulated net investment loss (36,912)
Net unrealized depreciation (computed on the basis of
identified cost) (1,763,855)
- --------------------------------------------------------------------------------
Total $20,883,394
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Net Assets $ 6,658,759
Shares Outstanding 753,043
Net Asset Value and Redemption Price Per Share
(net assets divided by shares of beneficial
interest outstanding) $ 8.84
Maximum Offering Price Per Share
(100 divided by 94.25 of $8.84) $ 9.38
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Net Assets $ 9,808,327
Shares Outstanding 1,113,190
Net Asset Value, Offering Price and Redemption Price
Per Share (net assets divided by shares of beneficial
interest outstanding) $ 8.81
- --------------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------------
Net Assets $ 4,416,308
Shares Outstanding 501,766
Net Asset Value, Offering Price and Redemption Price
Per Share (net assets divided by shares of beneficial
interest outstanding) $ 8.80
- --------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Period Ended
October 31, 1998 /(1)/
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $18,552) $ 127,642
Interest 26,634
- --------------------------------------------------------------------------------
Total investment income $ 154,276
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 76,956
Distribution and service fees
Class B 25,752
Class C 14,739
Custodian fee 60,513
Transfer and dividend disbursing agent fees 11,288
Printing and postage 7,303
Amortization of organization expenses 6,178
Registration fees 6,115
Legal and accounting services 860
Miscellaneous 1,637
- --------------------------------------------------------------------------------
Total expenses $ 211,341
- --------------------------------------------------------------------------------
Deduct --
Reduction of investment adviser fee $ 18,112
Reduction of custodian fee 1,233
- --------------------------------------------------------------------------------
Total expense reductions $ 19,345
- --------------------------------------------------------------------------------
Net expenses $ 191,996
- --------------------------------------------------------------------------------
Net investment loss $ (37,720)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (147,240)
Foreign currency transactions 808
- --------------------------------------------------------------------------------
Net realized loss $ (146,432)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(1,769,162)
Foreign currency 5,307
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(1,763,855)
- --------------------------------------------------------------------------------
Net realized and unrealized loss $(1,910,287)
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $(1,948,007)
- --------------------------------------------------------------------------------
/(1)/ For the period from the start of business, April 22, 1998, to October 31,
1998.
See notes to financial statements
10
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
FINANCIAL STATEMENTS CONT'D
Statement of Changes in Net Assets
Increase (Decrease) For the Period Ended
in Net Assets October 31, 1998/(1)/
- --------------------------------------------------------------------------------
From operations --
Net investment loss $ (37,720)
Net realized loss (146,432)
Net change in unrealized
appreciation (depreciation) (1,763,855)
- --------------------------------------------------------------------------------
Net decrease in net assets
from operations $(1,948,007)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 9,619,827
Class B 11,302,337
Class C 5,803,262
Cost of shares redeemed
Class A (2,408,094)
Class B (578,409)
Class C (907,522)
- --------------------------------------------------------------------------------
Net increase in net assets from Fund
share transactions $22,831,401
- --------------------------------------------------------------------------------
Net increase in net assets $20,883,394
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ --
- --------------------------------------------------------------------------------
At end of period $20,883,394
- --------------------------------------------------------------------------------
Accumulated net
investment loss
included in net assets
- --------------------------------------------------------------------------------
At end of period $ (36,912)
- --------------------------------------------------------------------------------
/(1)/ For the period from the start of business, April 22, 1998, to October 31,
1998.
See notes to financial statements
11
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
For the Period Ended
October 31, 1998(1)(2)
Class A Class B Class C
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value -- Beginning of period $10.000 $10.000 $10.000
- ---------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 0.012 $(0.039) $(0.055)
Net realized and unrealized loss (1.172) (1.151) (1.145)
- ---------------------------------------------------------------------------------------------------------------------------
Total loss from operations $(1.160) $(1.190) $(1.200)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of period $ 8.840 $ 8.810 $ 8.800
- ---------------------------------------------------------------------------------------------------------------------------
Total Return(3) (11.60)% (11.90)% (12.00)%
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 6,659 $ 9,808 $ 4,416
Ratios (As a percentage of average daily net assets):
Net expenses 1.97%(4) 2.72%(4) 2.97%(4)
Net expenses after custodian fee reduction 1.95%(4) 2.70%(4) 2.95%(4)
Net investment income (loss) 0.25%(4) (0.80)%(4) (1.15)%(4)
Portfolio Turnover 14% 14% 14%
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
+ The operating expenses of the Fund may reflect a reduction of the investment adviser fee, an allocation of
expenses to the Investment Adviser, or both. Had such actions not been taken, the ratios and net investment
income (loss) per share would have been as follows:
<S> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses 2.20%(4) 2.95%(4) 3.20%(4)
Expenses after custodian fee reduction 2.18%(4) 2.93%(4) 3.18%(4)
Net investment income (loss) 0.02%(4) (1.03)%(4) (1.38)%(4)
Net investment income (loss) per share $ 0.001 $(0.050) $(0.066)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, April 22, 1998, to October 31,
1998.
(2) Net investment income (loss) per share was computed using average shares
outstanding.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(4) Annualized.
See notes to financial statements
12
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Eaton Vance Tax-Managed International Growth Fund (the Fund) is a series of
Eaton Vance Mutual Funds Trust (the Trust). The Trust is an entity of the
type commonly known as a Massachusetts business trust and is registered under
the Investment Company Act of 1940 as a diversified open-end management
company. The Declaration of Trust permits the Trustees to issue interests in
the Fund. The Fund offers three classes of shares. Class A shares are sold at
the effective public offering price, which is based on the effective net
asset value per share plus the applicable sales charge. Class B and Class C
shares are sold at net asset value and are subject to a contingent deferred
sales charge (see Note 6). All classes of shares have equal rights to assets
and voting privileges. Realized and unrealized gains and losses and net
investment income, other than class specific expenses, are allocated daily to
each class of shares based on the relative net assets of each class to the
net assets of the Fund. Each class of shares differs in its distribution plan
and certain other class specific expenses. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuations -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National
Market System are valued at closing sale prices, on the exchange where such
securities are principally traded. Futures positions on securities or
currencies are generally valued at closing settlement prices. Unlisted or
listed securities for which closing sale prices are not available are valued
at the mean between the latest bid and asked prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost, which approximates value. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B Income -- Dividend income is recorded on the ex-dividend date for dividends
received in cash and/or securities. However, if the ex-dividend date has
passed, certain dividends from foreign securities are recorded as the Fund is
informed of the ex-dividend date. Interest income is recorded on the accrual
basis.
C Income Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal
income or excise tax is necessary. Withholding taxes on foreign dividends and
capital gains have been provided for in accordance with the Fund's
understanding of the applicable country's tax rules and rates. At October 31,
1998, the Fund, for federal income tax purposes, had a capital loss carryover
of $147,240 which will reduce the taxable income arising from future net
realized gain on investments, if any, to the extent permitted by the Internal
Revenue Code and thus will reduce the amount of distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal income or excise tax. Such capital loss carryover will expire on
October 31, 2006.
D Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates is not separately
disclosed.
E Forward Foreign Currency Exchange Contracts -- The Fund may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from movements in the value of a
foreign currency relative to the U.S. dollar. The Fund will
13
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
enter into forward contracts for hedging purposes as well as non-hedging
purposes. The forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until such time as
the contracts have been closed or offset.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Fund. Pursuant to the custodian agreement, IBT receives a
fee reduced by credits which are determined based on the average cash
balances the Fund maintains with IBT. All significant credit balances used to
reduce the Fund's custodian fees are reported as a reduction of operating
expenses on the Statement of Operations.
G Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over
five years.
H Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
2 Distributions to Shareholders
------------------------------------------------------------------------------
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of its net
investment income and at least one distribution annually of all or
substantially all of its net realized capital gains. Distributions are paid
in the form of additional shares of the Fund or, at the election of the
shareholder, in cash. Shareholders may reinvest distributions in shares of
the Fund at the net asset value as of the close of business on the
ex-dividend date. The Fund distinguishes between distributions on a tax basis
and a financial reporting basis. Generally accepted accounting principles
require that only distributions in excess of tax basis earnings and profits
be reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
overdistributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital. During the period ended
October 31, 1998, the Fund has reclassified amounts to reflect a decrease in
accumulated net investment loss and an increase in accumulated net realized
loss of $808 due to permanent differences between book and tax accounting.
Net investment loss, net realized loss and net assets were not affected by
these reclassifications.
3 Shares of Beneficial Interest
-------------------------------------------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
For the Period Ended
Class A October 31, 1998/(1)/
- --------------------------------------------------------------------------------
Sales 993,335
Redemptions (240,292)
- --------------------------------------------------------------------------------
Net increase 753,043
- --------------------------------------------------------------------------------
For the Period Ended
Class B October 31, 1998/(1)/
- --------------------------------------------------------------------------------
Sales 1,177,721
Redemptions (64,531)
- --------------------------------------------------------------------------------
Net increase 1,113,190
- --------------------------------------------------------------------------------
For the Period Ended
Class C October 31, 1998/(1)/
- --------------------------------------------------------------------------------
Sales 602,832
Redemptions (101,066)
- --------------------------------------------------------------------------------
Net increase 501,766
- --------------------------------------------------------------------------------
/(1)/ For the period from the start of business, April 22, 1998, to October 31,
1998.
14
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
4 Investment Adviser Fee and Other Transactions with Affiliates
-----------------------------------------------------------------------------
Eaton Vance Management (EVM) earns an investment adviser fee as compensation
for management and investment advisory services rendered to the Fund. The fee
is computed at the monthly rate of 1/12 of 1% (1.00% per annum) of the Fund's
average daily net assets up to $500 million, and at reduced rates as daily
net assets exceed that level. For the period ended October 31, 1998 the
effective annual rate, based on average daily net assets was 1.00%. EVM
voluntarily waived $18,112 of the investment advisory fee.
Except as to Trustees of the Fund who are not members of EVM's organization,
officers and Trustees receive remuneration for their services to the Fund out
of such investment adviser fee. Certain officers and Trustees of the Fund are
officers and directors/trustees of EVM. Eaton Vance Distributors, Inc. (EVD),
a subsidiary of EVM and the Fund's principal underwriter, received $25,777 as
its portion of the sales charge on sales of Class A shares for the period
ended October 31, 1998.
Trustees of the Fund who are not affiliated with the Investment Adviser may
elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
period ended October 31, 1998, no significant amounts have been deferred.
5 Distribution and Service Plans
-----------------------------------------------------------------------------
The Fund has adopted a Service Plan for the Fund's Class A shares (the "Class
A Plan") that is designed to meet the service fee requirements of the sales
charge rule of the National Association of Securities Dealers, Inc. The Class
A Plan provides that the Fund may make service fee payments for personal
services and/or the maintenance of shareholder accounts to the Principal
Underwriter, financial service firms ("Authorized Firms") and other persons
in amounts not exceeding 0.25% of average daily net assets for Class A shares
for any fiscal year. The Trustees have initially implemented the Class A Plan
by authorizing quarterly service fee payments to the Principal Underwriter
and Authorized Firms in amounts not expected to exceed 0.25% of the average
daily net assets for any fiscal year which is based on the value of Class A
shares sold by such persons and remaining outstanding for at least twelve
months. Class A expects to begin making service fee payments during the
quarter ended June 30, 1999.
The Fund has also adopted distribution plans ("Class B Plan" and "Class C
Plan", collectively the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. The Plans, which are approved annually, require the Fund
to pay the Principal Underwriter, EVD, amounts equal to 1/365 of 0.75% of the
Fund's Class B and Class C daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no
outstanding Uncovered Distribution Charges, which are equivalent to the sum
of (i) 5% and 6.25% of the aggregate amount received by the Fund for Class B
and Class C shares sold, respectively, plus (ii) interest calculated by
applying the rate of 1% over the prevailing prime rate to the outstanding
balance of Uncovered Distribution Charges due EVD, of each respective class
reduced by the aggregate amount of contingent deferred sales charges (see
Note 6) and daily amounts theretofore paid to EVD by each respective class.
The amount payable to EVD with respect to each day is accrued on such day as
a liability of the Fund and, accordingly, reduces the Fund's net assets. For
the period ended October 31, 1998, the Fund paid or accrued $25,752 and
$11,054, respectively, to or payable to EVD representing 0.75% of average
daily net assets of Class B and Class C shares, respectively. At October 31,
1998, the amount of Uncovered Distribution Charges of EVD calculated under
the Plans was approximately $504,000 and $352,000 for Class B and Class C
shares, respectively.
In addition, the Plans authorize the Fund to make payments of service fees to
EVD, Authorized Firms, and other persons in amounts not exceeding 0.25% of
their average daily net assets for each fiscal year. Service fee payments are
made for personal services and/or the maintenance of shareholder accounts.
Under the Class B Plan, this fee is paid quarterly in arrears based on the
value of Class B shares sold by such persons and remaining outstanding for at
least twelve months. Under the Class C Plan, EVD currently expects to pay to
an Authorized Firm (a) a service fee (except on exchange transactions and
15
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
reinvestments) at the time of sale equal to 0.25% of the purchase price of
the Class C shares sold by such Firm and (b) monthly service fees
approximately equivalent to 1/12 of 0.25% of the value of Class C shares sold
by such Firm and remaining outstanding for at least one year. During the
first year after a purchase of Class C shares, EVD will retain the service
fee as reimbursement for the service fee payment made to Authorized Firms at
the time of sale. For the period ended October 31, 1998, Class C paid or
accrued service fees to or payable to EVD in the amount of $3,685. Class B
expects to begin making service fee payments during the quarter ending
June 30, 1999. Service fees are separate and distinct from the sales
commissions and distribution fees payable by the Fund to EVD, and as such are
not subject to automatic discontinuance when there are no outstanding
Uncovered Distribution Charges of EVD.
6 Contingent Deferred Sales Charge
-----------------------------------------------------------------------------
Class B and Class C shares are each subject to a contingent deferred sales
charge (CDSC). A CDSC is imposed on any redemption of Class B shares made
within six years of purchase. A CDSC of 1% is imposed on any redemption of
Class C shares made within one year of purchase.
Generally, the CDSC is based on the lower of the net asset value at the date
of redemption or date of purchase. No charge is levied on Class B and Class C
shares acquired by reinvestment of dividends or capital gains distributions.
The Class B CDSC is imposed at declining rates that begin at 5% in the case
of redemptions in the first and second year after purchase, declining one
percentage point each subsequent year. No CDSC is levied on Class B and
Class C shares which have been sold to EVD or its affiliates or to their
respective employees or clients. CDSC received on Class B and C redemptions
are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under the Class B and Class C Distribution Plans (see Note 5).
CDSC charges received on Class B and C redemptions when no Uncovered
Distribution Charges exist for the respective classes will be credited to the
Fund. EVD received approximately $7,000 and $900 of CDSC paid by shareholders
of Class B and Class C shares, respectively, during the period ended October
31, 1998.
7 Investment Transactions
-----------------------------------------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $24,197,933 and $1,971,098, respectively, for the period ended
October 31, 1998.
8 Federal Income Tax Basis of Investments
-----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at October 31, 1998, as computed on a federal
income tax basis, are as follows:
Aggregate cost $ 22,820,142
-----------------------------------------------------------------------------
Gross unrealized appreciation $ 473,533
Gross unrealized depreciation (2,284,351)
-----------------------------------------------------------------------------
Net unrealized depreciation $ (1,810,818)
-----------------------------------------------------------------------------
9 Line of Credit
-----------------------------------------------------------------------------
The Fund participates with other funds and portfolios managed by EVM and its
affiliates in an $80 million, ($130 million effective November 12, 1998)
unsecured line of credit agreement with a group of banks. The Fund may
temporarily borrow from the line of credit to satisfy redemption requests or
settle investment transactions. Interest is charged to each fund or portfolio
based on its borrowings at an amount above the Eurodollar rate or federal
funds advanced funding rate. In addition, a fee computed at an annual rate of
0.10% on the daily unused portion of the line of credit is allocated among
the participating funds and portfolios at the end of each quarter. The Fund
did not have any significant borrowings or allocated fees during the period
ended October 31, 1998.
10 Risks associated with Foreign Investments
-----------------------------------------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing,
16
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
and financial reporting requirements and standards of practice comparable to
those applicable to domestic issuers. Investments in foreign securities also
involve the risk of possible adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitation on
the removal of funds or other assets of the Fund, political or financial
instability or diplomatic and other developments which could affect such
investments. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. In general, there is less overall governmental
supervision and regulation of foreign securities markets, broker-dealers and
issuers than in the United States.
17
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders
of Eaton Vance Tax-Managed
International Growth Fund:
- --------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Eaton Vance Tax-Managed International Growth
Fund (the Fund) as of October 31, 1998, the related statement of operations, the
statement of changes in net assets and the financial highlights for the period
from the start of business, April 22, 1998, to October 31, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. Our procedures included confirmation of
securities owned as of October 31, 1998 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights referred to
above, present fairly in all material respects, the financial position of Eaton
Vance Tax-Managed International Growth Fund at October 31, 1998, the results of
its operations, the changes in its net assets and its financial highlights for
the period from the start of business, April 22, 1998, to October 31, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 4, 1998
18
<PAGE>
Eaton Vance Tax-Managed International Growth Fund as of October 31, 1998
INVESTMENT MANAGEMENT
Eaton Vance Tax-Managed International Growth Fund
Officers
James B. Hawkes
President and Trustee
William H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President
Robert B. MacIntosh
Vice President
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Jessica M. Bibliowicz
President and Chief Operating Officer,
John A. Levin & Co.
Director, Baker, Fentress and Company
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law, Georgetown University
Law Center
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
19
<PAGE>
Investment Adviser and Administrator of Eaton Vance
Tax-Managed International Growth Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street,16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Eaton Vance
Tax-Managed International Growth Fund
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
IGSRC-12/98
